AUS
NZ
UK
CA
USA
IND
Summary
- British Universities earn nearly £40 billion annually, most of which is under risk now as a result of the coronavirus pandemic
- Without a bailout package from the government, 13 universities in the country run the risk of going bankrupt, putting the degrees of thousands of existing students at risk
The financial condition of major universities in the United Kingdom is in a very onerous state thanks to the outbreak of the coronavirus pandemic in the country beginning February 2020. In a report published by the Institute of Fiscal Studies (IFS) on the state of the UK education industry in the wake of the COVID- 19 crisis, it is reported that as many as 13 universities in the country are on the brink of collapse, if a timely intervention is not sought.
The industry, which attracts a significant number of international students and scholars is expecting the enrollments to come down significantly for this year and a large number of existing students are not likely to fulfil their academic requirements for the 2020-21 academic session. Therefore, these universities have requested the government for a bailout package to prevent the loss of highly skilled staff and students from the universities and warn that the long-term effect of the pandemic will be disastrous for the British economy if no action is taken quickly.
The three-scenario analysis by IFS
In its estimate, IFS has elaborated that the total financial losses to the British University sector would range between £3 billion and £19 billion in the long-run (for three different scenarios). To put things in perspective, the total earnings of the UK Universities are about £19 billion for a year. The universities with a larger share of international students will be the hardest hit followed by institutions which are largely dependent on tuition income and do not have any endowment-support.
The study anaylsed the net reserves position for top 20 universities of the UK till the year 2024. It found out that 13 of them would be sitting on negative net assets in 2024, due to the devastating impact of the Covid-19 crisis.
The study suggests a targeted government bailout costing targeted bailout worth £140 million to keep these institutions up and running.
The institute has drawn out three scenarios - an optimistic, a central, and a pessimistic scenario under which it expects universities to either fully absorb the impact of the pandemic hit without much damage on one hand or more than a dozen universities shutting their doors because of the pandemic on the other hand.
In the report, the IFS estimated that the total loss to the University system in the optimistic scenario will be around £3 billion, with this majority of this drop coming from the lower international student enrollments (amounting to £1.4 billion), which they will be able to make up for in the long-run.
In the central scenario, the institute estimates that the universities will face a loss of around £11 billion, with nearly £2.8 billion of this shortfall coming from lower international student enrollments and £3.8 billion from deficits of university-sponsored pension schemes.
In the pessimistic scenario, the thinktank expects the total losses to the university system in the country to be around £19 billion, with lower international enrollments accounting for £4.3 billion and deficits of university-sponsored pension schemes contributing to £7.6 billion.
The importance of foreign students for the British education sector: The British Universities not only bring significant revenues to the economy, but also attract the brightest students from across the world, making it a hub of fresh global talent. The universities in the United Kingdom are known for their world-class infrastructure, latest study curriculum, and a variety of employment as well as research-oriented courses to choose from. The country being home to some of the largest companies in the world, also provides excellent employment opportunities for young graduates to start a rewarding career.
Demands from the Government
While the large and prestigious universities in the UK would be able to draw upon their large pool of donors who could bail them out of the present crisis. However, for institutions that do not have such a support base will require government funding to come out of this crisis.
University UK (UUK), the universities’ lobby group in the country, has proposed a six-point agenda to the government, so that its members can navigate effectively through this crisis.
The main demands of the universities’ association are as follows:
- Government to provide complete funding for the research works being carried out by PhD students for the year 2020-21
- Allocate funds to sustain courses that are crucial to the public sector of the country e.g. nursing, medicine, and teaching
- Allocate a transformation fund to the sector to achieve long-term sustainability goals
- Provide financing to avoid any redundancies in university staff, confirm that UK universities are fully eligible for the furlough scheme
- Make a targeted support for smaller and specialized education institutes, which are especially vulnerable
- Give relaxation in visa and quarantine requirements so that a greater number of global students can travel to the United Kingdom
On the bailout funding side, though the government has not yet come out with any specific plans to particularly support universities across Britain, however, many of them are already taking advantage of the existing stimulus plans rolled out to support the industry in the country. Nevertheless, it is evident that the higher education sector requires a more focused stimulus package, and only time will tell if government is in a position to offer the same, especially if the corona-pandemic does not settle down substantially beginning January 2021.
COVID- 19’s long term impact on the country’s education sector: There would be a definite reduction in the number of students enrolling in the British Universities in the year 2020-21 and 2021-22. The restrictions placed by the government on foreign travelers coming to the UK except for business and leisure purposes has largely impacted the student community . Given their immense contribution towards the economic and intellectual development in the country, it is expected that the government would consider providing some travel relaxations.
The higher education sector in Britain is undergoing crisis, as a fallout of the coronavirus pandemic. UK’s leading thinktank IFS has estimated that in the worse-case scenario, the sector will lose almost 50 per cent of its existing annual income, if the trend continues. While the top tire Universities might ride the crisis better than the smaller ones, they too will have to undertake cost-cutting measures including laying off staff, to sail through. Therefore, a government bailout package would be required for the British universities who attract fresh global talent. Government support will go a long way in protecting the future of these institutions, their employees, and the students currently enrolled in them.
